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Share prices of GoPro (NASDAQ: GPRO) are down more than 60% over the past year. Investors are clearly not impressed with what's going on at the action-camera maker. The company has a plan to overhaul its business and the truth is that it may not succeed. Management could also run out of time to get it to work. The company's future is a bit blurry at the moment.

Here's what you need to know if you are looking at GoPro stock and where it might be a year from now.

The good news about GoPro

There are positive things to note about GoPro's business. For starters, its technology is pretty good and has a very loyal following. Just go to the company's YouTube channel and watch some of the death-defying feats people have filmed with a GoPro. The quality of the footage is impressive. And few people would dare risk a normal camera or their smartphone to capture most of those moments. A specialized, super-tough camera is what's required.

Image source: GoPro.

GoPro has also taken the strength of its brand and products and built a subscription service. That service is tied to its cameras and makes it easier for customers to store, share, and edit their footage. The subscriber base has grown quickly, going from around 942,000 in the first quarter of 2021 to just over 2.5 million in Q1 2024. This has clearly been a success for the consumer discretionary company because it creates a valuable recurring revenue stream.

Then there's the company's balance sheet. GoPro ended the first quarter with around $93 million in long-term debt and almost $134 million in cash and marketable securities. That means that it has zero net debt, which is a very good thing.

But there are still some problems to consider here.

The bad news about GoPro

GoPro's cameras are pretty cool, but the target market is fairly small. The risk here is that it has already saturated the space and that the market isn't big enough to sustain the company over the long term. It should be noted that GoPro hasn't yet managed to turn a sustainable profit. A cellphone is likely to be more than enough camera for most people. That's a big problem for GoPro, because one of its key initiatives is to expand its product line to attract more customers. If you are going to buy the stock you have to believe that GoPro can attract more customers.

GPRO data by YCharts

The early results on bringing in more customers aren't great. Although the subscription service did expand quickly, the subscriber count has been fairly static since Q3 2023. That's troubling because the fourth quarter includes the holiday selling season, during which you would normally expect GoPro to sell more cameras and attract more subscribers. That lack of subscriber growth through this key selling period is a sign that maybe the future isn't as bright as the company hopes.

And then there's the balance sheet. Yes, GoPro has zero net debt today. But its cash balance has been falling. At the end of 2022, GoPro had around $367 million in cash and marketable securities. By the first quarter of 2024, that was down to about $134 million. There are a lot of moving parts here, including stock buybacks and debt reduction efforts, but the big picture is that GoPro is burning through cash at a time when it is trying to support the introduction of new products. Those products may or may not gain traction in the market. It has time, but there's still a limited amount of cash available and investors need to keep a close eye on the balance sheet.

GoPro will learn a lot in the next year

The next year or so will be very important for GoPro. If the new products don't resonate with customers and its subscriber count remains static, it will be a sign that GoPro may not have what it takes to remain a stand-alone company. That's not a knock on the product, just the hard reality of operating a business that fills what is a niche need. The next year at GoPro could be the time in which investors find out there's more to the brand or that management is going to have to consider more dramatic strategic alternatives. This is a stock that only more aggressive investors should be looking at today.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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